Advertising Law – Covering Your Ads® Bloghttps://www.coveringyourads.com
Thu, 14 Mar 2019 22:58:48 +0000en-UShourly1https://wordpress.org/?v=4.9.10#Transparency: California’s Social Media DISCLOSE Acthttps://www.coveringyourads.com/2018/09/articles/social-media-law/californias-social-media-disclose-act/
https://www.coveringyourads.com/2018/09/articles/social-media-law/californias-social-media-disclose-act/#respondTue, 18 Sep 2018 16:52:45 +0000https://www.coveringyourads.com/?p=1786With the backdrop of November midterm elections and social media executives testifying before Congress about foreign efforts to interfere in U.S. democracy, California lawmakers are working on finalizing a new bill aimed to promote transparency and accountability around political advertisements on social media platforms. The “Social Media DISCLOSE Act” (the “Act”) seeks to build upon...… Continue Reading

]]>With the backdrop of November midterm elections and social media executives testifying before Congress about foreign efforts to interfere in U.S. democracy, California lawmakers are working on finalizing a new bill aimed to promote transparency and accountability around political advertisements on social media platforms. The “Social Media DISCLOSE Act” (the “Act”) seeks to build upon the existing California DISCLOSE Act, established in 2017, by extending political advertisement disclosure requirements to online social media platforms.

The Act applies to “online platforms”, which is defined to include websites and digital apps that sell advertising directly to advertisers (but not websites and apps that only display ads sold through another platform). Assuming the Act is signed by Gov. Jerry Brown, social media online platforms that display political advertisements will be required to disclose information regarding the funders of those ads and to keep a database of the political ads they run, starting as of January 1, 2020, when the law takes effect.

Under the Act, when social media platforms display a political ad on their platform, they must either display (a) the text “paid for by” or “ad paid for by” followed by the disclosure name provided by the committee purchasing the ad, or (b) a hyperlink, icon, button or tab with the text “who paid for this ad?”, “paid for by” or “ad paid for by” that links to the profile or page of the committee that paid for the ad, or to another website containing information regarding the sponsor of the ad.

The Act also requires social media platforms to maintain a record of any political advertisement disseminated on the platform by a committee that purchased $500 or more in advertisements on that platform during the previous 12 months, and to make these records publicly available online. These records must include: (1) a digital copy of the advertisement; (2) the approximate number of impressions generated from the advertisement, and the date and time that the advertisement was first displayed and last displayed; (3) information regarding the range charged or the total amount spent on the advertisement; (4) the name of the candidate to which the advertisement refers and the office to which the candidate is seeking election, as applicable, or number or letter of the ballot measure and the jurisdiction to which the advertisement refers; and (5) the name and identification number of the committee that paid for the advertisement. Platforms are required to make this information publicly available as soon as practicable and to retain it for at least four years.

The law also imposes certain disclosure obligations on the political committees that pay for the ads, subject to certain exceptions. Upon requesting ad placement on the platform, the committee must notify the platform that the ad is a political ad as defined under the Act. They must also provide the platform with their name and the name of the candidate and the office to which the candidate is seeking election. Alternatively, if the advertisement is in support of a ballot measure, the committee must disclose to the platform the number or letter of the ballot measure.

]]>https://www.coveringyourads.com/2018/09/articles/social-media-law/californias-social-media-disclose-act/feed/0Winning the Gold: Why Venue Owners Need to Consider the Importance of Flexibility in Sponsorship Agreementshttps://www.coveringyourads.com/2018/05/articles/advertising/winning-gold-venue/
https://www.coveringyourads.com/2018/05/articles/advertising/winning-gold-venue/#respondTue, 01 May 2018 17:19:01 +0000https://www.coveringyourads.com/?p=1772Sponsorship rights are a critical component of the revenue stream for almost every major venue in the United States. Long-term sponsorship deals not only provide much of the funding for new venues to be built, but they also support the refurbishments that allow existing venues to retain tenants and attract short-term residents, such as concerts,...… Continue Reading

]]>Sponsorship rights are a critical component of the revenue stream for almost every major venue in the United States. Long-term sponsorship deals not only provide much of the funding for new venues to be built, but they also support the refurbishments that allow existing venues to retain tenants and attract short-term residents, such as concerts, sporting events and tournaments. Sponsorship spending in North America alone came to a staggering $23.1 billion in 2017, an increase from the 2016 figure of $22.3 billion. Most of this sponsorship cash flows to and from venues in major cities. One example out of many is Los Angeles, which is home to a multitude of venues supported by an even wider array of long-term sponsors. Los Angeles recently hosted the 2018 NBA All-Star Game and the 2018 NCAA Men’s Basketball Western Regional Semifinals. The city is now gearing up for additional high profile events, such as the 2020 MLB All-Star Game, Super Bowl LVI and the 2028 Summer Olympics, along with related ancillary events. The Los Angeles market is currently undergoing a period of intense growth, as indicated by the construction of new, state of the art venues, such as the Ram’s stadium at Hollywood Park, the Banc of California Stadium for the LAFC, and (potentially) a new stadium for the Clippers. The abundance of venues both new and old is a clear sign that even more high-profile events will be coming to LA in the years to come. These popular events – both those already scheduled and those yet-to-be-planned – present venue owners with additional hosting opportunities, making it essential to have flexibility in existing long-term sponsorship agreements.

When high-profile special events roll into town, they bring with them massive crowds – and significant business opportunities for venues big and small. Frequently, event organizers and their partners will seek to contract with venue owners for the use of their facilities. These uses include not only the main events themselves, but also related “spillover” functions. However, these special opportunities can conflict with a venue’s existing sponsor relationships. Sponsorship agreements are generally multi-year contracts which often contain highly restrictive exclusivity provisions. Such contracts offer substantial benefits for both parties, as the venue owner gets economic stability and the sponsor gets exclusive access to a valuable demographic. Without careful drafting and built-in flexibility, however, these long-term contracts can severely limit a venue’s ability to host special events. One factor that makes the coexistence of long-term sponsors and special events particularly difficult is the “clean venue” policy that many special events insist upon. Many of the highest-profile special events have some version of this policy, which restricts (or eliminates altogether) a venue’s existing advertising for the duration of the special event. The Olympic Games, the All-Star Game, March Madness and the Super Bowl are just a few of the events that come with heavy restrictions on existing advertising. Frequently, organizers of special events have agreed to complete industry exclusivity for their own sponsors, and these requirements are passed along to participating venues. Exclusive sponsorship deals between special events and companies in the automotive, beverage and financial services industries are amongst the most prominent examples. Unless a venue’s existing sponsorship agreements provide for explicit carve-outs that allow a venue to host special events, a venue’s existing sponsors are unlikely to support the removal and/or covering of the graphics and displays for which they bargained, at least absent additional costly consideration. This friction increases even more when long-term sponsors will be replaced, albeit temporarily, by their own prime competitors.

So, then, the question is this: how does a venue put itself in play to take advantage of the opportunities created by special events without poisoning its relationships with long-term sponsors? The keys to negotiating sponsorship agreements that allow for this balance include foresight, careful planning and explicit setting of mutual expectations. Venue owners in any town or city that will become host to special events need to think ahead and negotiate explicit carve-outs with future opportunities in mind. This may seem daunting, but the interests of venues and sponsors can be more closely aligned than would initially appear to be the case. In fact, carve-outs for special events can be mutually beneficial for both venues and sponsors. Often, the additional revenue generated by hosting special events is used to improve the host venue, thereby creating value for all parties involved. In sum, the process of negotiating and drafting sponsorship agreements should incorporate the flexibility needed to allow a venue to take part in major events without permanently undermining the key, long-term relationships that provide steady revenue.

]]>At the Nevada State Athletic Commission (NSAC) hearing on September 14, 2015, UFC star Nick Diaz sat in silence as he heard state commissioners Francisco V. Aguilar, Skip Avansino, Pat Lundvall, and Anthony A. Marnell III deliberate on the future of his career. Commissioner Lundvall suggested a lifetime ban from professional fighting. Commissioner Avansino balked; a lifetime ban seemed excessive. After all, although this was his third offense, Diaz had only tested positive for marijuana during his post-fight drug test, whereas his opponent, former middleweight champion Anderson Silva, had reportedly tested positive for steroids that same night, provoking a one-year ban and a $380,000 fine from NSAC.

This article was originally published in the Sports Litigation Alert. To read the entire article please click here, or visit the Sports Litigation Alert website.

]]>On June 23, 2015, the Ninth Circuit in Cabral v. Supple LLC, — Fed. Appx. –, 2015 WL 3855142 (9th Cir. June 23, 2015) placed a significant hurdle in the path of false advertising class actions. Specifically, the Court held that in class actions “based upon alleged misrepresentations in advertising and the like,” in order for common questions to predominate—an essential Rule 23(b) inquiry—“it is critical that the misrepresentation in question be made to all of the class members.”

The underlying action concerned advertisements of a beverage sold by Supple, LLC, which was advertised to contain certain key ingredients (i.e., glucosamine, hydrochloride and chondroitin sulfate) to provide joint relief. Plaintiff Cabral alleged that she purchased the beverage after watching an infomercial, but subsequently discovered that the key ingredients have no measurable impact on joint problems. Cabral brought suit under California’s Unfair Competition Law, False Advertising Law and Consumer Legal Remedies Act, and sought to certify a class of all persons in California that purchased the beverage.

The district court subsequently certified Cabral’s requested class of “all persons residing in the State of California who purchased [the beverage] for personal use and not for resale since December 2, 2007.” The district court found, in relevant part, that a common issue—whether Supple misrepresented that the beverage is clinically proven effective to treat joint pain—predominated.

In reversing the district court’s grant of class certification, the Ninth Circuit began by reciting the standard for predominance under Rule 23(b): “in order for the issue to predominate, it must at least be common and there must be cohesion among the class members.” And it was in meeting this standard that the Court determined the district court erred. The Ninth Circuit determined that record did not support the conclusion that “all of the class members saw or otherwise received the misrepresentation that the beverage was ‘clinically proven effective in treating joint pain.’” The Court implied that consumers actually had to see advertisements that declared the beverage “clinically proven effective in treating joint pain,” and held “that the misrepresentation in question [had to] be made to all of the class members” in order for common issues to predominate.

The Ninth Circuit’s opinion is in line with its recent decision in Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012) (discussed in greater detail here), in which it held that “the relevant class must be defined in such a way as to include only members who were exposed to advertising that is alleged to be materially misleading.” This line of authority has a significant practical impact on false advertising class actions. It is hard to imagine the false advertising case where the alleged advertisement and/or message at issue did not vary throughout the class period and particularly among the various advertising medium used. In conjunction with authority like Mazza, this opinion will provide strong ground to force plaintiffs’ counsel to carve out an extremely narrow class (i.e., a class drawn around one specific advertisement), if not defeat class certification outright.

]]>https://www.coveringyourads.com/2015/07/articles/advertising-law/ninth-circuit-to-false-advertising-class-actions-drop-dead/feed/0Second Circuit Clarifies the Use of Legal Presumptions of Consumer Confusion and Injury in Certain Lanham Act Caseshttps://www.coveringyourads.com/2014/08/articles/advertising-law/second-circuit-clarifies-the-use-of-legal-presumptions-of-consumer-confusion-and-injury-in-certain-lanham-act-cases/
https://www.coveringyourads.com/2014/08/articles/advertising-law/second-circuit-clarifies-the-use-of-legal-presumptions-of-consumer-confusion-and-injury-in-certain-lanham-act-cases/#respondThu, 21 Aug 2014 17:38:10 +0000http://www.coveringyourads.com/?p=1599On Tuesday, July 29, the United States Court of Appeals for the Second Circuit “clarified certain aspects of [its] false advertising jurisprudence” and held that, where literal falsity and deliberate deception have been proved in a market with only two players, it is appropriate to use legal presumptions of consumer confusion and injury for the purposes...… Continue Reading

]]>On Tuesday, July 29, the United States Court of Appeals for the Second Circuit “clarified certain aspects of [its] false advertising jurisprudence” and held that, where literal falsity and deliberate deception have been proved in a market with only two players, it is appropriate to use legal presumptions of consumer confusion and injury for the purposes of finding liability in a false advertising case brought under the Lanham Act.[1]

1. Background and Procedural History

The nutritional ingredient involved in this litigation is a dietary ingredient called folate, a B vitamin that helps the body make new cells. Folate is considered to be a critical supplement for prenatal health, and low folate intake is associated with various vascular, ocular neurological and skeletal disorders, and may pose a serious risk to individuals with diabetes.

Since 2002, Merck & Cie (“Merck”)[2] manufactured and sold a folate product under the name “Metafolin” to customers who utilize it in finished products for resale, such as vitamins and supplements. Metafolin is comprised of a naturally occurring, biologically active form of Methyltetrahydrofolate (“5-MTHF”). Merck was the first company to manufacture a pure and stable stereoisomer of L-5-MTHF, a 6S Isomer Product, as a commercial source. Metafolin was the product of decades of research and the investment of tens of millions of dollars. It is one of Merck’s most important products.

In 2006, Gnosis S.p.a. and Gnosis Bioresearch S.A. (collectively, “Gnosis”) started making a folate product named “Extrafolate,” a tetrahydrofolate that is a mixture of the R isomer and the S isomer, or a D-5-MTHF product. D-5-MTHF does not occur in nature and does not have the same nutritional benefits to humans as Merck’s L-5-MTHF product. Because it is a mixed product, Extrafolate sells at a much lower price than Metafolin.

In the predominant naming conventions of compounds, isomers are labeled with either a “D” or an “L” based on the isomer’s relation to the glyceraldehyde molecule or “R” and “S” based on the isomer’s relation to the carbon atom. In the context of folates, “S” or “L” refers to the naturally occurring isomer, and “R” or “D” refers to the non-natural isomer. If manufactured synthetically, a folate is “mixed” and would be identified as having both “D” and “L,” or “R” and “S,” and thus be labeled as either “D,L” or “R,S.”

Between 2006 and 2009, Gnosis printed various types of marketing materials, including brochures and product specification sheets, using chemical descriptions, terms, and formulas attributed to the pure 6S isomer for the sale and marketing of its 6R,S mixture product. Gnosis sold its product to six customers, both directly and indirectly, during this time. In 2007, Merck sued Gnosis, accusing it of falsely advertising Extrafolate by using the pure Isomer Product chemical name and properties in marketing Extrafolate.

Following a bench trial, the Southern District of New York determined that Merck had established Gnosis’ liability for false advertising under Section 43(a) of the Lanham Act,[3] and awarded damages, prejudgment interest, and attorney’s fees and imposed a corrective advertising injunction.

2. The Court’s Decision

The Second Circuit affirmed both the district court’s finding of liability under the Lanham Act and the relief awarded. On appeal, Gnosis challenged the district court’s conclusion that consumer confusion and injury could be presumed in light of its factual findings. Gnosis also argued that the district court erred in awarding Merck all of Gnosis’ profits and further erred by awarding enhanced damages by trebling the amount of profits.

Liability under the Lanham Act

As background, the Second Circuit explained that “[t]o establish false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), the plaintiff must first demonstrate that the statement in the challenged advertisement is false. A false advertising claim may be based on one of two “theories.” Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93, 112 (2d Cir. 2010). “Falsity may be established by proving that (1) the advertising is literally false as a factual matter, or (2) although the advertisement is literally true, it is likely to deceive or confuse customers.” S.C. Johnson & Son, Inc. v. Clorox Co., 241 F.3d 232, 238 (2d Cir. 2001) (internal quotation marks omitted).

The Court then turned to the district court’s application of the consumer confusion presumption. The Second Circuit noted that a Lanham Act plaintiff may prove actual consumer confusion or deception resulting from the violation, or that a defendant’s actions were intentionally deceptive thus giving rise to a rebuttable presumption of consumer confusion, in order to receive an award of damages. The court noted upheld the trial court’s finding that the majority of Gnosis’ challenged marketing materials were literally false because they used the common name for the pure 6S isomer product (rather than the “mixed” nomenclature) to discuss and advertise Extrafolate, a mixed product.[4] The Second Circuit explained that when a defendant’s advertising of products is literally false, a Lanham Act plaintiff need not “provide evidence of actual consumer confusion by resort to witness testimony, consumer surveys, or other such evidence in order to establish entitlement to damages under the Lanham Act.[5]

In light of the finding of literal falsity, the Second Circuit upheld the district court’s presumption of consumer confusion resulting from Gnosis’s marketing specification sheets, brochures, data sheets, and certificates of analysis.[6] It explained that, once literal falsity – here, an unchallenged factual finding – was proved, no further evidence of actual consumer confusion was necessary.

The Second Circuit upheld the district court’s finding of implied falsity as well. It reviewed the chemical description of the pure isomer in brochures, material safety data sheets, and certificates of analysis, and concluded that while the description was literally true “when applied to the pure product,” it was used in a manner that was intended to mislead consumers as to the mixed product Gnosis was actually selling. It explained that the record readily supports the conclusion that “a significant number of consumers” were misled by Gnosis’s false labeling, noting that Gnosis had failed to demonstrate an absence of confusion is adequately supported by the record.[7] Thus, based upon the findings of literal falsity and the “egregious nature” of Gnosis’s deliberate intent to deceive the purchasing public, the Second Circuit noted that the imposition of a presumption of consumer confusion was appropriate.

Based upon its finding of literal falsity, the district court determined that injury to Merck could be presumed. The Second Circuit affirmed, rejecting Gnosis’ argument that a presumption of injury is applicable only in cases involving comparative advertising mentioning the plaintiff’s product by name. Previously, the Second Circuit had held that in cases involving misleading, non-comparative commercials which touted the benefits of the products advertised but made no direct reference to any competitor’s product “‘some indication of actual injury and causation’ would be necessary in order to ensure that a plaintiff’s injury is not speculative.”[8] By comparison, injury could be presumed in false comparative advertising cases in which the advertising directly targeted the plaintiff’s product. While the Court acknowledged that this was “not the typical comparative advertising case” because Gnosis did not directly target Merck by mentioning Metafolin in its advertising, the Second Circuit explained that the folate market consisted of only two direct competitors, Merck and Gnosis. Because Merck was the only competitor to Gnosis, it logically followed that the false advertising campaign conducted by Gnosis injured Merck. The Court emphasized that in light of this direct competition, that Gnosis’ falsely advertised folate product cost less than Merck’s Metafolin exacerbated the extent of injury to Merck.[9]

Thus, in the most interesting facet of the Second Circuit’s decision, it held that when “a plaintiff has met its burden of proving deliberate deception in the context of a two-player market, it is appropriate to utilize a presumption of injury.”[10] It explained that the application of a presumption of injury was appropriate even if the challenged advertisement “is not a classic instance of comparative advertising where one company’s advertisement mentions a competitor’s product by name.” Looking at this case, the Second Circuit noted that “the utilization of a presumption of injury” carries no risk of speculative injury to Merck.”[11]

Damages

The Second Circuit upheld the district court’s award of lost profits, noting that the record supported the finding of willful deception, and that the award of lost profits was necessary to deter future unlawful conduct, prevent Gnosis’s unjust enrichment, and compensate Merck for the business it lost as a result of the false advertising that led certain customers to believe they were purchasing a pure isomer product from Gnosis. Further, the Second Circuit explained that in a false advertising case such as this one, where the parties are direct competitors in a two-player market, and where literal falsity and willful, deliberate deception have been proved, the presumptions of injury and consumer confusion may be used for the purposes of awarding both injunctive relief and monetary damages to a successful plaintiff.[12]

Gnosis challenged the district court’s order of corrective advertising arguing that, when coupled with the award of damages, it constituted double recovery. The Second Circuit disagreed explaining that “in a false-advertising case such as this one, actual damages under section 35(a) can include”:

profits lost by the plaintiff on sales actually diverted to the false advertiser;

profits lost by the plaintiff on sales made at prices reduced as a demonstrated result of the false advertising; —the costs of any completed advertising that actually and reasonably responds to the defendant’s offending ads; and

quantifiable harm to the plaintiff’s good will, to the extent that completed corrective advertising has not repaired that harm.[13]

Significance of Merck Eprova

In Merck Eprova, the Second Circuit clarified that Lanham Act plaintiffs are afforded a presumption of injury in cases where the plaintiff has met its burden of proving deliberate deception in the context of a two-player market, even if the defendant’s advertising does not mention the competitor’s product by name. Prior to this decision, the presumption was only afforded to plaintiffs in comparative advertisement cases, and plaintiffs in misleading, non-comparative commercials clearly targeting a particular competitor, regardless of whether they explicitly name the competitor.

The Court also expanded the use of presumptions of injury and confusion in the context of awarding damages. Previously these presumptions were only explicitly allowed to be used to award injunctive relief. With this decision, the Court has authorized, in appropriate circumstances, the award of monetary damages on the basis of these presumptions as well.

[7] The Second Circuit explained that in light of the finding of literal falsity, it did not need to decide whether the district court’s failure to squarely address Gnosis’s rebuttal evidence, with respect to the literally true, but impliedly false statements warrants remand.

]]>https://www.coveringyourads.com/2014/08/articles/advertising-law/second-circuit-clarifies-the-use-of-legal-presumptions-of-consumer-confusion-and-injury-in-certain-lanham-act-cases/feed/0False Advertising and Antitrust Law: Sometimes the Twain Should Meethttps://www.coveringyourads.com/2014/08/articles/advertising-law/false-advertising-and-antitrust-law-sometimes-the-twain-should-meet/
https://www.coveringyourads.com/2014/08/articles/advertising-law/false-advertising-and-antitrust-law-sometimes-the-twain-should-meet/#respondWed, 13 Aug 2014 17:15:09 +0000http://www.coveringyourads.com/?p=1592Imagine that a drug manufacturer figured out how to compete with a blockbuster drug by making a cheaper and more effective alternative. The pharmaceutical company that makes the blockbuster drug starts flooding the market with false advertisements about the safety of the alternative drug before it is even available to consumers, effectively taking away the...… Continue Reading

]]>Imagine that a drug manufacturer figured out how to compete with a blockbuster drug by making a cheaper and more effective alternative. The pharmaceutical company that makes the blockbuster drug starts flooding the market with false advertisements about the safety of the alternative drug before it is even available to consumers, effectively taking away the new drug’s ability to compete. In this hypothetical, there are two potential victims: the new manufacturer that could have competed on the merits and the consumers (and possibly third-party payors) that lost the ability to choose a potentially better product or benefit from the price decrease of the blockbuster drug. Should antitrust law remedy this situation?

This article was originally published by CPI Antitrust Chronicle. To read the entire article, please click here.

]]>https://www.coveringyourads.com/2014/08/articles/advertising-law/false-advertising-and-antitrust-law-sometimes-the-twain-should-meet/feed/0Was AdChoices Just Flipped the (Twitter)Bird on Behavioral Targeting?https://www.coveringyourads.com/2013/08/articles/advertising-law/was-adchoices-just-flipped-the-twitterbird-on-behavioral-targeting/
https://www.coveringyourads.com/2013/08/articles/advertising-law/was-adchoices-just-flipped-the-twitterbird-on-behavioral-targeting/#respondWed, 07 Aug 2013 13:04:00 +0000http://coveringyourads.wp.lexblogs.com/2013/08/was-adchoices-just-flipped-the-twitterbird-on-behavioral-targeting/It appears that users won’t be seeing the blue AdChoices triangle icon on Twitter anytime soon. AdChoices and its blue triangle icon are the work of the Digital Advertising Alliance (a consortium of trade groups) to provide users with disclosure of and the ability to opt out of targeted behavioral advertising (e.g. ads based on...… Continue Reading

]]>It appears that users won’t be seeing the blue AdChoices triangle icon on Twitter anytime soon. AdChoices and its blue triangle icon are the work of the Digital Advertising Alliance (a consortium of trade groups) to provide users with disclosure of and the ability to opt out of targeted behavioral advertising (e.g. ads based on websites visited). This industry self-regulatory option was intended to be a broad and unifying option to stave off governmental regulation.

Recently Twitter began allowing promoted tweets to be targeted based on users’ individual browsing activity. But Twitter has opted for its own opt out structure utilizing user controlled browser settings rather than the advertising industry’s AdChoices blue triangle. The Twitter process does work, and is easy to use if one is aware of it. But can AdChoices survive or become a viable industry standard with the desired effect of creating cohesive industry self-regulation when a major platform player like Twitter chooses not to participate? Even if the browser model for opting out becomes the dominant self-regulatory model, does this schism make governmental regulation more likely because the browser option doesn’t have the obvious user interface that the blue triangle does? Another VHS vs. Betamax or Blu Ray vs. HD DVD?

Facebook did not initially utilize AdChoices for certain targeted advertising products, but subsequently became fully compliant with AdChoices. Will Twitter do the same? Company statements suggest it won’t, but time will tell.

]]>On Thursday, June 27, 2013, the Federal Trade Commission (“FTC”) announced that Mortgage Investors Corporation of Ohio, Inc. (“Mortgage Investors”) will pay a $7.5 million civil penalty for alleged violations of the Telemarketing Sales Rule (“TSR”). This settlement marks the largest fine that the FTC has ever collected for TSR violations and cleverly coincides with the 10th Anniversary of the National Do Not Call Registry. Mortgage Investors is one of the largest refinancers of veterans’ home loans and provides home loan refinancing services in 42 states. To promote these services, Mortgage Investors employs hundreds of telemarketers to cold-call consumers, encouraging them to schedule in-home sales appointments with company affiliated licensed loan officers. This tactic in and of itself is not problematic. However, according to the FTC’s Complaint, Mortgage Investors has continually thwarted multiple provisions of the TSR. The original TSR was adopted by the FTC in 1995, in response to Congress’ directive to prescribe rules prohibiting abusive and deceptive telemarketing acts or practices. In 2003, the TSR was extensively amended, resulting in, among other things, the establishment of the National Do Not Call Registry, a list that consumers can join to opt-out of receiving telemarketing calls. The TSR, as amended, prohibits sellers and telemarketers from initiating outbound telephone calls to numbers on the National Do Not Call Registry. 16 C.F.R. § 310.4(b)(1)(iii)(B). In addition, it prohibits sellers and telemarketers from initiating outbound telephone calls to any consumer who has previously stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the seller whose goods or services are being offered. 16 C.F.R. § 310.4(b)(1)(ii)(A). Lastly, the TSR prohibits sellers and telemarketers from engaging in conduct that denies or interferes with a person’s right to be placed on a list of persons who made do-not-call-requests. 16 C.F.R. § 310.4(b)(1)(ii). In its Complaint, the FTC alleges that in promoting its home loan refinancing services, Mortgage Investors placed more than 5.4 million calls to telephone numbers listed on the National Do Not Call Registry between February 2, 2009 and July 30, 2012 and failed to remove consumers from its internal call lists when they so requested, continuing to target such consumers through cold calling. This action is also the first brought by the FTC to enforce the Mortgage Acts and Practices – Advertising Rule (the “MAP Rule”), which allows the FTC to collect civil penalties for deceptive mortgage advertising. According to the Complaint, Mortgage Investor telemarketers led consumers to believe that low interest, fixed rate mortgages were available at no cost when in reality Mortgage Investors offered only adjustable rate mortgages in which consumers’ payments would increase with rising interest rates and would require consumers to pay closing costs. Telemarketers for Mortgage Investors also allegedly misled consumers about their affiliation with the Department of Veterans Affairs. In addition to the $7.5 million fine, Mortgage Investors is barred from denying future requests by consumers to be placed on internal do-not-call lists, calling consumers on the Do Not Call Registry, and from misrepresenting any terms related to mortgage credit products or affiliation with any government entity. Businesses employing telemarketing strategies should heed this settlement, which makes clear that enforcement of the TSR and like regulations remains a top priority for the FTC.

]]>https://www.coveringyourads.com/2013/07/articles/advertising-law/do-not-call-violations-lead-to-7-5-million-civil-penalty/feed/0New York AG Addresses Cause Marketing on Social Mediahttps://www.coveringyourads.com/2012/11/articles/advertising-law/new-york-ag-addresses-cause-marketing-on-social-media/
https://www.coveringyourads.com/2012/11/articles/advertising-law/new-york-ag-addresses-cause-marketing-on-social-media/#respondWed, 28 Nov 2012 13:39:49 +0000http://socialmedialawupdate.wp.lexblogs.com/new-york-ag-addresses-cause-marketing-on-social-media/The New York Attorney General’s Charities Bureau recently released “Five Best Practices for Transparent Cause Marketing” which contains general best practices for cause marketing campaigns, including campaigns conducted on social media. Cause marketing, also known as commercial coventures, is the practice by a for-profit company of donating a portion of the purchase price of an...… Continue Reading

]]>The New York Attorney General’s Charities Bureau recently released “Five Best Practices for Transparent Cause Marketing” which contains general best practices for cause marketing campaigns, including campaigns conducted on social media. Cause marketing, also known as commercial coventures, is the practice by a for-profit company of donating a portion of the purchase price of an item or service to a charity. Cause marketing is becoming increasingly popular among companies looking to do good as well as to generate positive publicity for their brand. Many states regulate cause marketing, however, New York’s Best Practices indicate that greater attention may begin to be focused on campaigns conducted using social media and other newer online platforms for giving.

According to the Best Practices, companies and charities’ “should be no less vigilant” in their conducting of cause marketing campaigns using social media than they would be in more traditional product sales settings. Applying the general best practices to the social media setting, the Best Practices advise that:

The terms of the campaign should be “clearly and prominently” disclosed as part of the online marketing

Marketing should include:

the amount to be donated to charity per action

the name of the charity

the dates of the campaign

any minimum or maximum amount to be donated

Companies are also told to track donations in real-time for the duration of the campaign and make the progress of the campaign transparent to users. When the campaign ends or any maximum amount is reached, it should be discontinued or at least made clear to users that any subsequent actions will not result in a donation to the charity. Companies are also told, as part of the general Best Practices, to post and maintain on their website the amount of the donation made by the company as a result of the campaign.

The Best Practices focus on social media campaigns conducted on sites such as Facebook or Twitter where a donation will be made for every person who “likes” or “follows” a company. But the Best Practices should be considered in conducting other social media and online campaigns as they are a window into how at least one Attorney General will view these types of campaigns.

The bottom line is that marketers should keep in mind that an overarching theme in the Best Practices are that consumers should receive helpful and truthful information about cause marketing campaigns. Tell consumers what you are doing and what they are getting for their money or their “likes.”

COPPA currently provides that operators of websites and other online services that collect personal information online about children under 13, or whose websites or services are directed at children under 13, must:

post a clear and comprehensive privacy policy on their website or service describing their information practices for children’s personal information;

give parents the opportunity to prevent further use or online collection of a child’s personal information; and

maintain the confidentiality, security, and integrity of information they collect from children.

The proposed updates to COPPA are designed to address challenges created by technology advancement since COPPA was enacted in 1998 – Twitter, Facebook, and the iPhone and other smart phones and mobile devices did not exist in 1998.

What would the proposed updates to COPPA mean for website and online services?

COPPA’s regulations would extend to mobile devices;

websites that integrate features such as a Facebook login, advertising networks, and downloadable software kits (“plug-ins”) would need to get verifiable parental consent before collecting personal information from children under 13;

behavioral advertising tracking cookies and geo-location information would be added to the definition of personal information that marketers and website operators must get verifiable parental consent to collect; and

COPPA would allow a website that attracts both children and adults to apply privacy protections only to those who say they are under 13 (currently, such websites must treat all users as under 13).

The proposed updates to COPPA have been in the making for several years. In September 2010, the FTC solicited public comments on how COPPA might be improved. In 2011, the FTC released its recommendations. It then solicited two additional rounds of comments on its recommendations. The FTC will make final recommendations by the end of the year.